Risk Taking Begets Risk Taking: Evidence from Casino Openings and Investor Portfolios

42 Pages Posted: 5 Aug 2015 Last revised: 15 Oct 2021

See all articles by Chi Liao

Chi Liao

University of Manitoba - Asper School of Business

Date Written: October 14, 2021

Abstract

We provide evidence that casino openings can have spillover effects on an individual's portfolio risk-taking. Using investor-level brokerage data and the initial legalization and opening of commercial casinos in the United States as a quasi-natural experiment, we find that after a casino opens in close geographical proximity to investors, those with a propensity to gamble increase their idiosyncratic portfolio risk by 12.86% relative to those who are unlikely to gamble. This effect lasts for approximately three months and does not affect systematic portfolio risk or portfolio returns. These results suggest that increased access to gambling can temporarily increase portfolio risk-taking for those with a propensity to gamble.

Keywords: investor behavior, portfolio risk taking, gambling

JEL Classification: D10, G10

Suggested Citation

Liao, Chi, Risk Taking Begets Risk Taking: Evidence from Casino Openings and Investor Portfolios (October 14, 2021). Available at SSRN: https://ssrn.com/abstract=2639700 or http://dx.doi.org/10.2139/ssrn.2639700

Chi Liao (Contact Author)

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

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